Liability for Class 1 National Insurance contributions
Liability for Class 1 National Insurance contributions occurs if a person works:
- in the UK under a contract of service or
- in an office with income taxable as employment income
Class 1 NI is made up of two parts – primary contributions payable by the employee and secondary contributions payable by the employer.
An employer of a person working abroad only has to pay Class 1 secondary National Insurance contributions if they:
- have a place of business in the UK or
- are resident or present in the UK.
However, employers can volunteer to pay the secondary National Insurance contributions if they wish.
The ‘host’ employer is the liable secondary contributor if:
- workers are seconded to a UK subsidiary or associate ‘host’ employer by a foreign employer after 6 April 1994 and
- the foreign company does not have a place of business in the UK.
Overseas Employer / Employment Agency
Where the contractual employer is overseas and the employee is supplied through an employment agency in the UK, the employment agency in the UK will be the secondary contributor.
Where the employee is supplied by an employment agency outside the UK, the client company in the UK will be the secondary contributor.
Usually there is liability to pay National Insurance contributions as soon as an employee starts work in Great Britain.
Special rules apply if the employee came from:
- a European Community (EC)/European Economic Area (EEA) member state, Switzerland or
- a country with which the United Kingdom has a reciprocal Social Security agreement or Double Contributions convention.
National insurance is a complex area anyway and where there is a foreign element involved the rules can become extremely complicated. RKG Consulting will be pleased to advise employers regarding the NI consequences of taking employees on either in the UK or seconding staff from abroad.